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##### FIN - A publisher sells books to Borders at $12 each

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Question;Question #1 A publisher sells books to Borders at $12 each. Borders prices the book to its customers at $24 and expects demand over the next two months to be normally distributed, with a mean of 20,000 and a standard deviation of 5,000. Borders places a single order with the publisher for delivery at the beginning of the two-month period. Currently, Borders discounts any unsold books at the end of two months down to $3, and any books that did not sell at full price sell at this price.;a. Borders will consider this book to be a bestseller if it sells 25,000 copies. What is the probability that it is a bestseller?;b. Borders will consider this book to be a flop if it sells less than 50% of the mean forecast. What is the probability that it is a flop?;c. What is the probability that the book will sell within 20% of its mean forecast?;d. What order quantity maximizes Borders? expected profit?;e. How much is this expected profit?;f. What is the corresponding fill rate?;g. How many books does Borders expect to sell at a discount?;h. The marginal production cost for the publisher is $1 per book. How much profit does the publisher make given Borders? actions?;Question #2 [Refund Contract]A movie studio sells the latest movie on DVD to Blockbuster at $10 per DVD. The marginal production cost for the movie studio is $1 per DVD. Blockbuster prices each DVD at $20 to its customers. DVD s are kept on the regular rack for a one-month period, after which they are discounted down to $5, Blockbuster places a single order for DVDs. Their current forecast is that sales will be normally distributed, with a mean of 10,000 and a standard deviation of 5,000.;a. How many DVDs should Blockbuster order?;b. What is its expected profit?;c. How many DVDs does it expect to sell at a discount?;d. What is the profit that the studio makes given Blockbuster?s actions?;A plan under discussion is for the studio to refund Blockbuster $4 per DVD that does not sell during the one-month period. As before, Blockbuster will discount them to $5 and sell any that remain.;e. Under this plan, how many DVDs should Blockbuster order?;f. What is the expected profit for Blockbuster?;g. How many DVDs are expected to be unsold at the end of the month?;h. What is the expected profit for the studio?;i. What should the studio do?;Question #3 [Revenue Sharing Contract]Top Gun Records and several movie studios have decided to sign a revenue-sharing contract for DVDs. Each DVD costs the studio $2 to produce. The DVD will be sold to Top Gun for $3. Top Gun in turn prices a DVD at $15 and forecasts demand to be normally distributed, with a mean of 5,000 and a standard deviation of 2,000. Any unsold CDs are discounted to $1, and all sell at this price. Top Gun will share 35 percent of the revenue with the studio, keeping 65 percent for itself.;a. How may CDs should Top Gun order?;b. How many CDs should Top Gun expect to sell at a discount?;c. What is the profit that Top Gun expects to make?;d. What is the profit that studio expects to make?;Question #4 [Buy-Back Contract]Tom owns an independent bookstore located in Philadelphia. Tom has to decide on the best order quantity for a new self-help book that is to be released soon. The books will each cost Tom $20 but will retail for $30. At the end of the season, Tom can dispose of all of the unsold copies of the book at $5 each. Tom estimates that demand can be represented by a normal distribution with mean 240 and a standard deviation of 100. The publisher?s cost per book is $7.;a. What order quantity maximizes Tom?s expected profit?;b. What is Tom?s expected profit?;c. What is the resulting profit for the publisher?;Now consider the supply chain to be a single (vertically-integrated) entity.;d. What quantity will maximize the supply chain?s profit?;e. How much is the total supply chain profit?;The publisher is proposing a buy-back arrangement: At the end of the season, they will buy back all unsold copies at $15.00. However Tom is responsible for shipping unsold copies back to the publisher at $1 per book.;f. What quantity should Tom order if he wishes to maximize his expected profit?;g. What is the resulting profit for the publisher?;h. What is the total profit for the supply chain?;Consider the question of the best buy-back price.;i. Compute the best buy-back price.;j. Compute the resulting profit for Tom under the best buy-back price.;k. Compute the resulting profit for the publisher under the best buy-back price.;l. What is the total profit for the supply chain now?

Paper#50557 | Written in 18-Jul-2015

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